Thousands of service men and women who fell behind on their car loans with Security National Automotive Acceptance Co. will be receiving refunds in coming months as the result of a settlement with the Consumer Financial Protection Bureau.
The CFPB sued Security National earlier this year for engaging in illegal debt collection tactics, charging that the company lied about, made threats and exaggerated the repercussions of defaulting on auto loans. On Wednesday, the agency entered into a settlement that will have Security National refund a portion of the delinquent payments made by some 2,200 affected service members, with total refunds amounting to $2.28 million, or an average of $1,036 per customer.
Security National, which neither admitted nor denied the allegations, said in a statement that it disagreed with the CFBP's complaint, but the cost and distraction of continuing to fight the agency wasn't in the best interest of the company or its customers.
"It's time to move on," company spokesman Craig Stevens said in a prepared statement. "We're proud of the work that we've done for our customers over the past 25 years, many of whom would not have had access to the credit they and their families need."
The CFPB said that while Security National engaged in some of the same abusive debt collection practices of many collection companies -- such as claiming that legal action was imminent or that the collection agent could or would seize a portion of the worker's wages -- this company also took advantage of the unique laws and rules affecting members of the military.
For instance, Security National coerced service men and women into paying debts by threatening that their failure to pay could result in action under the Uniform Code of Military Justice and in demotion, discharge and a loss of security clearance. Although military law does have provisions addressing fraud, larceny and writing bad checks, the CFPB said the chance that a service member would face such severe punishment for falling behind on a loan is highly unlikely.
Moreover, Security National buried a provision in the fine print of its loan contracts that said it could contact commanding officers about service member's debts. When customers fell behind on their loans, the company's collection agents contacted -- or threaten to contact -- superior officers. Federal debt collection statutes generally bar creditors from discussing a consumer's debt with anyone other than the consumer, his or her spouse, or attorney.
As part of the settlement, Security National must stop engaging in the allegedly abusive tactics, pay a $1 million penalty to the CFPB's Civil Penalty Fund, identify each of the service men and women who paid under coercive circumstances and provide refunds.
A spokeswoman for the CFPB said affected consumers needn't do anything. They should simply receive a check in the mail in coming months. However, if an affected service member doesn't receive a check, he or she should contact the company or the CFPB.